The last line sets up a login on tty1. If you have a keyboard (eg. USB keyboard via a powered HUB) and display connected, then you'd be able to login using those. I am using a chestnut43 board with LCD, and i can use tty1 on a couple of occasions when I messed up the networking.

the command to change console environment variable are follows:

# setenv console tty1

# saveenv

The console setting is passed to the kernel at boot time. It Only tells the kernel where to send messages; It does not have anything to do with login terminals as that is handled by inittab and getty. I can use tty1 because it allows me to see the kernel messages on the LCD during boot.